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Preference shares are shares in which the owners of the shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the companys creditors, bondholders / debenture holders. In short they get preference over equity shareholders in case of payment of dividends on in case of winding up of the company.

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